Original article
From concept to CPT code to compensation: how the payment system works

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Abstract

All radiologists and radiation oncologists provide medical services to patients every day with the full anticipation that these services will be appropriately reimbursed. Yet most take this process for granted. Few have even a rudimentary idea how the system works by which a coding mechanism and reimbursement schedule are developed and maintained for the vast array of services they provide. Clearly, this is not good business. You need not stay in the dark any longer! This article describes (1) the fundamental structure of reimbursement for radiology and radiation oncology services; (2) the multiple steps required as a new procedure advances from a research concept to the assignment of a code in the American Medical Association’s Current Procedural Terminology; (3) the process by which the new procedure and code are assigned a reimbursement value in the Medicare Fee Schedule, which acts as the base for over 75% of current medical reimbursement; and (4) the maintenance of this system for existing procedures.

Section snippets

Introduction and the basics

First, some of what is to follow may seem a bit dry (even including a few formulas), but it is well worth your while to get a tall, cool drink and read on! This is, after all, the basis for the financial viability of your practice. Also, the abbreviations and acronyms are numerous and can initially seem overwhelming, so a glossary has been included at the conclusion of the article.

Though all long for the days when payment for medical services was actually based on charges determined by

Coding: a brief history

The American Medical Association (AMA) in 1966 recognized the need for an organized method that would be compatible with developing computer technology for describing medical procedures. With input from multiple medical specialties, including radiology, the Current Procedural Terminology (CPT) was developed. Initially a three-digit coding system, this subsequently evolved into the five-digit version (CPT-4) [5] in use today. Currently consisting of over 8000 codes, this system acts as a

Maintenance of CPT

Clearly, with a coding system of this magnitude and the constant evolution of medical care delivery, a sophisticated process [6] must exist so that the system continues to include all currently performed procedures and reflect the practice of medicine. The oversight body charged with this task is CPT Editorial Panel. This group of 16 members consists of

  • 11 practicing physicians appointed by the AMA’s Board of Trustees (note that all specialties are thus not represented on the panel at all

The relative value system: a brief history

Prior to 1992, physician’s services were reimbursed on the basis of the “usual, customary, and reasonable” format, based on historical charges. There was a growing perception that the system had evolved inequitably, particularly when comparing procedural and nonprocedural services (e.g., one coronary artery bypass grafting procedure equaled approximately 35 office visits). Congress began the process of considering options to create a payment system reflecting the relative physician work of the

Maintaining relativity

To ensure input from organized medicine to this new system of relativity, the AMA established the Relative Value Update Committee (RUC) [9], whose charge was to advise the HCFA (now the CMS) on appropriate relative values for codes for new procedures approved by the CPT Editorial Panel and maintain accurate relativity. This committee was constructed to include representatives of all the major medical specialties as well as representation from the CMS, the AMA, and the HCPAC. The RUC is charged

Resource-based practice expense

Initially in 1992, only the physician work element of the three-part reimbursement MFS was mandated to be “resource based” and subjected to this formal scrutiny. The practice expense element RVUs continued to be based on historic charge data. Congress mandated that this element also be converted to a “resource-based” system. This conversion occurred through a gradual 4-year transition from 1999 to 2002. Several methodologies for this change were examined by the CMS. Again, the AMA and medical

Malpractice RVUs

With the implementation of the MFS, the malpractice cost element of physician reimbursement, designed to cover the cost of professional liability insurance, was estimated to be valued at 4% of overall reimbursement. It was not until 2000, again on the basis of legislation passed by Congress, that the CMS devised a system to attempt to convert the malpractice reimbursement to a resource-based system. Using data on malpractice premiums for each of the major specialties from all 50 states, the CMS

Opportunities to evaluate the fee schedule and comment

Clearly, the MFS has evolved into a complex, multifaceted system. Moreover, because Medicare is the largest single payer and the majority of other payers use this system, continuous monitoring by all physicians, predominantly through their respective specialty societies, is critical. Fortunately, the CMS is mandated to publicly announce, through the Federal Register, the anticipated fee schedule for the following year. This is done first in a “proposed rule,” usually distributed during the

A real example

Now that you have been introduced to all the steps along the way, let us follow a new procedure from new clinical concept through to inclusion in the MFS. CT angiography (CTA) will be used as a true recent example. Prior to 2001, there were no “accurate” codes for CTA procedures. Following the development of slip-ring CT scanners and, subsequently, multidetector scanners, clinical research was performed at many institutions, and a significant body of peer-reviewed literature demonstrated the

The timeline

The amount of time it takes a new procedure to reach the stage of code request is obviously quite variable depending on how quickly the research demonstrates safety and efficacy. The CPT is published once a year, and any changes become effective January 1. The new MFS that recognizes the new and revised codes in that new edition of CPT is released just prior to that date for implementation on January 1. However, to meet all of the federal notice requirements as well as satisfy the complete CPT

Summary

Radiologists and radiation oncologists spend a tremendous amount of time developing the skills of their respective professions and continually strive to stay current with developing new medical procedures to properly care for their patients. For the health of their practices, they must be equally knowledgeable about the business of medicine, specifically the mechanisms through which the payment schedules for their important services are developed. Using CTA as an example, and the MFS as the

AHA

The American Hospital Association, a trade association of hospitals.

AMA

The American Medical Association, which owns the copyright for and publishes CPT book and related educational materials. The CPT Editorial Panel, RUC, and PEAC are all AMA committees.

CF

Conversion factor (in dollars per RVU), adjusted annually and used by the CMS to convert RVUs to dollars.

CMS

The Center for Medicare and Medicaid Services (formerly the HCFA), the federal governmental agency, under the US Department of Health and Human

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    Resource-based relative valuesAn overview

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  • Omnibus Reconciliation Act of 1989 (PL...
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There are more references available in the full text version of this article.

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